Dreyfus To Merge Some Bond Funds

Dreyfus plans to merge a number of retail bond mutual funds that have similar investment strategies, according to documents filed with the Securities and Exchange Commission last week.

The fund mergers are subject to approval by shareholders at special meetings to be held March 1. They come as the money manager's parent company, Mellon FinancialMEL, is in the process of being acquired by Bank of New YorkBK. However, Dreyfus spokeswoman Patrice Kozlowski says the fund mergers have been in the works for some time and are "absolutely unrelated to any activity with the Bank of New York."

The $133 million DPASXDreyfus Premier Select Intermediate Municipal Bond Fund will be folded into the $199 million DMUAXDreyfus Premier Select Municipal Bond Fund.

The $118 million DTBDXDreyfus Insured Municipal Bond Fund will be folded into the $1.97 billion DRTAXDreyfus Municipal Bond Fund.

The $233 million DCIMXDreyfus California Intermediate Municipal Bond Fund will be folded into the $1.25 billion DCAAXDreyfus Premier California Tax Exempt Bond Fund.

The $180 million DNJIXDreyfus New Jersey Intermediate Municipal Bond Fund will be folded into the $470 million DRNJXDreyfus Premier New Jersey Municipal Bond Fund.

The $238 million DNYXXDreyfus New York Tax Exempt Money Market Fund will be folded into the $332.9 million GNMXXGeneral New York Municipal Money Market Fund.

The $92 million PSGNXDreyfus Premier GNMA Fund is being folded into the $714 million DRGMXDreyfus GNMA Fund .

The $173 million DCTXXDreyfus California Tax Exempt Money Market Fund is being folded into the $412 million GCAXXGeneral California Municipal Money Market Fund.

The $130 million DCTIXDreyfus Connecticut Intermediate Municipal Bond Fund is being folded into the $160 million PSCTXDreyfus Premier State Municipal Bond Fund, Connecticut Series.

The $65 million DMAIXDreyfus Massachusetts Intermediate Municipal Bond Fund is being folded into the $193 million PMAZXDreyfus Premier State Municipal Bond Fund, Massachusetts Series.

The $48 million PTXBXDreyfus Premier Select Municipal Bond Fund, Texas Series is being folded into the $200 million DRMBXPremier Select Municipal Bond Fund .

"Management of Dreyfus has reviewed the performance in the Dreyfus Family of Funds and has concluded that it would be appropriate to consolidate certain funds having similar investment objectives and management policies," Dreyfus said in proxy statements filed with the SEC Thursday and Friday.

"Management believes that the reorganization should enable shareholders to benefit from more efficient portfolio management and will eliminate the duplication of resources and costs associated with marketing and servicing the funds as separate entities."

In each case, the smaller fund will transfer its assets to the larger fund in exchange for shares in the larger fund. Dreyfus will then distribute these shares to investors in the smaller fund, and the smaller fund will cease operating.

Dreyfus said the proposed fund mergers will not have any tax consequences for shareholders, because no capital gains or losses will be realized. Investors in the funds being merged will not be charged a sales commission, or load, on the new shares they receive.

Dreyfus, and not the funds, will pay any expenses related to the mergers.

In some cases, such as Connecticut Intermediate, California Intermediate, Massachusetts Intermediate and New Jersey Intermediate, funds that can currently be purchased directly from Dreyfus without paying a brokerage commission are being merged into funds with a load, or sales charge. In these cases, investors in the fund being acquired will receive a new Z-class of no-load shares. The Z-shares will not be available to new investors, however.

If the case of the merger between Dreyfus Premier GNMA (a load fund) and Dreyfus GNMA (a no-load fund), Dreyfus GNMA will be converted into a load fund in order to receive the assets of Dreyfus Premier GNMA, according to Kozlowski. In this case, existing Dreyfus GNMA investors will receive no-load Z-class shares.